Busseto Foods CEO: Chances To Stay In Fresno, CA “Very, Very High” If PG&E’s Special Economic Development Rate Receives Approval

Posted on April 16th, 2012 by
   

Mike Grazier, CEO/President of Busseto Foods, discusses the potential impacts that a special economic development electricity rate that PG&E is trying to have approved would have on his company’s chances of growing their business in Fresno, California. The company currently spends over $850,000 in electricity costs each year.

Full transcript:

Mike Grazier: I feel pretty blessed to have a business located in an area where the city government, specifically the mayor, takes such a proactive role in this endeavor. One of these leaders speak, who talk the talk. And here we have an instance where her actions are being generated. For me that is fantastic.
Ben Lack: How did you get into the meat business and how did Busseto end up in Fresno?
Mike Grazier: First of all let me describe the business. We are specialty meat producer. Most of our products have Italian origins, but we make dried cured meats, salami, prosciutto, coppa, all of the specialty meats that one could typically find in Europe. Those are not cooked per se but they air dried as they are cured. So our process depending on the item takes anywhere from 4-weeks to 4-months to produce.As an operation, we are also a high energy consumer because these products rest in rooms where these rooms’ temperature and humidities are controlled when it go to certain cycles to dry to product properly. That’s what we do.

We’ve been here since 1981. The business was started by a German who came over from Switzerland and found his way to Fresno. He began making very ethnic salamis and specialty meats that didn’t quite capture the audience he was hoping for. Probably in this day and age it would be more acceptable than it was back in the early eighties. So he sold his majority interest in the company to an Italian group. The Italian group expanded the facility and brought it up to a little more sizeable operation and then decided that they need an American with American market savvy, if you will, to help them get the company turned around. So, I came on board at August of 1991.

Ben Lack: What kind of production were you generating?
Mike Grazier: And at that time, our company was quite small and operating on a pretty a hefty operating losses. We just weren’t producing enough products; we were out-nicheing ourselves. What we began to do was broaden the scope of our audience. We started producing, trite as it may sound, we started producing what people are buying instead of the old management wanted to produce.  We kept a lot of the old lines, the old upscale and niched lines but we started develop broader and richer products.Slowly the company started to turn around and I believe in 1996, we changed our name, we changed our graphics, our packaging and all of that. From that moment on, it seemed like we just took off like a rocket.

Since 1996 we’ve been profitable and have been blessed enough to expand our business several times over the last 15 years. In fact in the last 10 years, I believe we have done four separate facility expansions. When I say expansions, typically what that involves is creating more rooms to dry product. The process that we do, the salamis, cured meats literally hang in these rooms in racks.

Ben Lack: Is it all being done in one facility or you have more than one facility?
Mike Grazier: Yes, it’s all being done in one facility.
Ben Lack: How big is that facility now?
Mike Grazier: That facility now is 80,000 square feet. Prior, when I came in it was a little over 20,000 square feet.
Ben Lack: How many people currently work at the company?
Mike Grazier: Approximately 110.
Ben Lack: Wow! And the business is still growing?
Mike Grazier: Yes, the business is still growing. In fact, just last fall we completed another facility expansion and added more drying rooms to the footprint that we have. So, now we’re getting, looking long range, we’re starting to contemplate on expansion… And by the way, I need to add to that in 2001, we also purchased a distribution center. So we have 2 facilities in Fresno, one is the main manufacturing center, if you will; most of our products are then shuttled over to the distribution center nearby. So long term, our expansion needs are going to be creating a mega facility that does the activities of what’s being done now.
Ben Lack: Do you plan to expand the business within the city or are you considering to move your expansion outside of Fresno?
Mike Grazier: Well, another key point to our company’s history occured in 2007 when we were purchased not wholly, we were purchased by a company out of Italy, called Fratelle Berreta. And Berreta celebrates 200 years this year being in the food business in Italy. They have plants also throughout Europe of course concentrated mostly in Italy.  They have a plant in New Jersey, a small facility in New Jersey. And now the Fresno facility.I mentioned that because as we consider expansion, sooner or later we are going to make a decision that we produce West, we ship East or we produce East and we ship West. And so, or perhaps, we meet in the middle and ship from the mid-west which tends to be the raw material source. So, those are several key components of why we would consider moving out of Fresno.

As for the considerations to staying in Fresno. Frankly, Fresno is a great place to do business in the sense that we’ve got a good labor pool, excellent access to Northern and Southern California, close to major freeways and we have a city administration that understands the value that food processors bring to the central valley here, and they are proud to have us and we are proud to be a member of Fresno.

Ben Lack: You’ve mentioned that part of your manufacturing process requires you to have these rooms at the right temperature so that the meat can cure appropriately. What is your energy bill look like on a monthly or annual basis?
Mike Grazier: Energy for us, just for electricity alone is about $850,000.00 a year. Total utilities are over a million.
Ben Lack: Have you made plans to make your distribution center and headquarters energy efficient?
Mike Grazier: We are doing what we can. We’ve installed energy efficient lighting and all those types of things. The larger projects, like installing solar for example, we are a part of these proposals are helping; we need help in finding those projects, finding access to the funding of those projects and finding people who help streamline the process so we know because we know how to approach the project.Because it is easy to say well, “Gee, we’ve heard that you are going solar, where do you go? Where do you find the resources? How do you make the correct decisions on the appropriate things? Where is the funding and the capital coming from?” So, I think in the past, California has behaved or has performed very well in terms of energy conservation, a lot of that funding and a lot of that streamlining tends to go either to Northern California or just Southern California which are of course major markets.

So what I think on some of these group recommendations are saying is to let’s make sure that the central valley has equal access to these funds, equal access to champions of these energy conservation grants so that companies like us know where to turn and where to go and help make that process more open. We have a long way to go as a company in terms of what we can do better. We do what we can but I think we can do better.

Ben Lack: PG&E is applying for a special economic development rate that would allow counties that have 125% unemployment above the state average a discount off whatever the current rate is, it could be as high as 35%. If the economic development rates were to be approved by the California Public Facilities Commission, how much of that would sway you into keeping your facility in Fresno compared to moving it outside of the city?
Mike Grazier: It is certainly a large tool and medium size tool box meaning the amount of money that we spent on our energy, a 35% incentive is a lot of money, a lot of money that can be freed up to other things that help us become more efficient and at the end of the day that is what we want to do. That’s a lot of what our decisions are based on, where we do, what we do more efficiently.  I think buying large, a lot of our larger operating cost, labor being one of them, the labor costs are attractive here in the Central Valley certainly versus the eastern seaboard, the east coast.
Ben Lack: Why is that?
Mike Grazier: It’s just that labor rates are higher in the East coast.
Ben Lack: What do you pay around now compared to New Jersey?
Mike Grazier: Well, now, our labor rates are probably 20% lower in the Central Valley than they are in New Jersey. And our operation in New Jersey is on the other side of the bridge, the one in New York. It is a pretty densed area. It is certainly one of the tools that we would use to help us become more efficient, help us stay here in the Central Valley.
Ben Lack: You know as you say, it is one tool but it’s definitely not the only thing that you’re going to be considering as you choose how you want to grow your business for other states.
Mike Grazier: It’s the environment here that is business friendly and wants to develop business, help develop business. Whether it is energy conservation, energy rates or another area such as you know expansions and all those types of things. You want to be a good corporate citizen, you want to be a good neighbor and you want to be in an area where the value that you bring to community are recognized.
Ben Lack: If the city is able to provide additional funding for energy efficiency and PG&E’s special economic development rate is approved, is that enough to make you 100% confident to grow the business in Fresno?
Mike Grazier: It makes our chances of remaining here very, very high. I wouldn’t say 100% because we don’t know what tomorrow brings. But it certainly will be a major factor.

Now, one thing about our business. Our business, our products are not inexpensive. Retailers will pay depending $2-4 a pound for our products and in some cases it is even more. Yet the competitive environment is such that if you’re 5 cents too high, you are out and the next guy is in.

Like many businesses, it is a very competitive business. We have been fortunate to grow and grow in times when so many people have not been able to grow. We feel very fortunate in that sense. But, we must remain very competitive and translate that competitive synergies into our products to create value for the ultimate consumer. That has got us going and helped us grow the business. The world probably doesn’t need another salami out there.

Ben Lack: What is your relationship like with Mayor Swearengin?
Mike Grazier: Last year was the inaugural Fresno Food Expo, The Fresno Food Expo is, once again, an initiative from the city. The idea was to create a food show, showcasing the food producers of the Central Valley and bringing buyers in to do some “one stop shopping” at the food show, where you see the bounties that come out from the central valley and helps promote Central Valley business.  So this food expo was a project the city started. I was invited to attended it and we exhibited it last year’s food expo. At that food expo I get a little closer to the mayor and understood what she was about and she understood our story and our message and so that’s how that relationship got started.
Ben Lack: How does the conversation turn into energy efficiency and sustainability? Is this a topic that you brought to the mayor in her office?
Mike Grazier: Actually, it was something the mayor brought to our attention that she was working on a project. When she first visited our facility, because she didn’t know a lot about us either until we connected.  She paid us a visit. I think she understood in going through our facility, how dependent we are on energy. She said, “You know, I’m working on an idea that you may find some value in, so let me explain” So at that time she kind of walked me through the idea. Of course, it was something we’ve been quite interested in. I think several months later, we had a visit also by some PG&E people who toured our facility. I think they toured our facility as well as several others. As a result of these visits to other companies as well, I think that helped develop the proposal that’s being put in front of the PUC.  I definitely feel that my views are being heard and feel fortunate that this was the case.

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